How the Hold Period Changes IRR and Equity Multiple in an Apartment Deal
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The hold period is how long a syndication owns the building before selling or refinancing. On the same deal, a longer hold usually raises the equity multiple (total money back divided by money in), because the building keeps earning and growing, while the IRR (the yearly rate of return) often levels off after a few years. In the example below, the projected IRR is about 10.7% for a 2 year hold and about 12.2% for 5, 7 or 10 years, while the equity multiple climbs from 1.22x to 2.66x. That is why a deal should be judged on both numbers, and on what happens if the sale is later than planned.
This post is part of our guide to real estate syndication. It runs one deal through five hold periods. Figures are as of November 2026 and the example is illustrative.
A worked example: one deal, five holds
A building is bought for $10,000,000 with $600,000 of NOI and a $6,500,000 interest-only loan at 6.5%, so the equity is $3,500,000. NOI grows 3% a year and the building sells at a 6.0% cap rate on the next year's NOI, with 2% selling costs. Closing costs, reserves and fees are left out to keep the math visible.
| Hold | IRR | Equity multiple | Profit on $3,500,000 |
|---|---|---|---|
| 2 years | 10.70% | 1.22x | $769,820 |
| 3 years | 11.58% | 1.37x | $1,295,765 |
| 5 years | 12.12% | 1.70x | $2,433,867 |
| 7 years | 12.22% | 2.06x | $3,692,741 |
| 10 years | 12.17% | 2.66x | $5,823,708 |
After about 5 years the IRR hardly moves, because each extra year earns about the same rate as the years before. The equity multiple and the profit keep growing, because the money stays invested at that rate for longer.
Why are short holds riskier than they look?
- Buying and selling costs weigh more. Closing costs, loan fees and the acquisition fee are spread over fewer years. This example leaves them out; including them lowers the short-hold IRR the most.
- The sale price carries the return. Over 2 or 3 years, most of the profit comes from the sale, so the exit cap rate decides almost everything. See cap rate compression and expansion.
- The market may not cooperate. If the planned sale year is a bad year to sell, the sponsor has to choose between selling for less and holding longer.
What happens when the hold runs long?
Holds are often extended when markets are weak or the business plan takes longer. A longer hold is not bad by itself; in the example the IRR barely changes. The risks are what the extension depends on: a loan maturing before the sale, a floating rate loan whose rate cap expires, or a business plan that never reaches the NOI the sale needs. See when a syndication's hold is extended and interest rate caps.
What should investors ask?
- What is the planned hold, and what in the business plan sets it?
- When does the loan mature, and does it match the hold?
- What are the IRR and equity multiple at the planned hold, and two years later?
- How much of the profit comes from the sale versus yearly distributions?
- Can you get money out before the sale? Usually not; see selling a syndication interest.
For what IRR and equity multiple measure, see equity multiple, IRR and cash-on-cash. Projections are estimates, not promises, and every investment can lose money.
How DoorRaise fits in
DoorRaise helps sponsors raise equity for apartment buildings with 5 or more units from their friends and followers. The deal page shows projected returns that DoorRaise computes from the sponsor's inputs, including the hold period, after DoorRaise's fees. DoorRaise forms the deal's LLC, prepares the offering documents, files Form D and verifies every investor's accreditation, in 506(b) and 506(c) deals. Investors fund by wire into escrow at Enterprise Bank & Trust, and distributions are quarterly by default. DoorRaise charges two flat fees: $1,500 to set up (non-refundable) and $5,000 a year for administration, the first year paid at closing from the money raised and only if the deal closes.
See how the money is shared at the sale with the free profit split tool.
FAQ
Does a longer hold period increase IRR?
Not necessarily. In many deals the IRR rises over the first few years as buying costs are spread out, then levels off. The equity multiple keeps rising with a longer hold.
Why does the equity multiple rise with the hold period?
Because the money stays invested longer, earning income and growth each year, so the total returned grows even when the yearly rate does not.
What is a typical hold period for an apartment syndication?
Business plans commonly target 3 to 7 years, but actual holds vary with the market and the plan. Read each deal's planned hold and loan maturity.
Which matters more, IRR or equity multiple?
Both. IRR shows how fast the money grows; equity multiple shows how much comes back. A high IRR on a short hold can return less money than a lower IRR held longer.
What happens if the sale is delayed?
The money stays invested longer, which may lower the IRR if the extra years earn less, and depends on the loan and the plan holding up. Ask the sponsor for the returns with a two-year delay.
Sources
- SEC, Investor.gov: investor bulletin on private placements under Regulation D
- Fannie Mae Multifamily, fixed-rate mortgage loans
This article is general information, not legal, tax or investment advice. The example deal and returns are illustrative and not a projection for any deal. DoorRaise is not a lender, law firm, broker-dealer, investment adviser or funding portal.